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PUNJAB & HARYANA HIGH COURT
Kapur, J.
Union Of India
Versus
S.Narain Singh
Second Appeal No. 236 of 1950,
Decided On : AUGUST 1, 1951
EXCISE - Auction of liquor shop - Conditions of sale - Variation by Chief Commissioner - Validity - Estoppel - Completed contract - Resale - Recovery of short-fall.
Fact of the Case:
The plaintiff, a licensed vendor of country liquor, participated in an auction for a country liquor shop in Katra Barian. The auction was held by the Collector, and the plaintiff made the highest bid of Rs. 3,72,000/-. However, the Collector asked the plaintiff to deposit Rs. 1,86,000/- as half the fee, which was in excess of the one-sixth of the annual fee required under the rules. The plaintiff objected to this demand and offered to deposit only one-sixth of the fee, which was Rs. 62,000/-. The Collector refused to accept this offer and ordered a resale of the shop, which resulted in a short-fall of Rs. 1,22,000/-. The plaintiff filed a suit for a declaration that the conditions of the auction regarding the deposit of more than one-sixth of the fees were ultra vires, that the resale was not binding, and that the action of the Government in trying to recover the amount of money was illegal. The trial court and the appellate court decreed the suit in favor of the plaintiff.
Finding of the Court:
The court held that the conditions of sale announced at the auction, which required the plaintiff to deposit more than one-sixth of the annual fee, were ultra vires and not binding on the plaintiff. The court also held that the auction sale was not complete until the bid was accepted by the Collector and finally approved by the Chief Commissioner, and since the bid was withdrawn before the Chief Commissioner gave his assent, there was no completed contract between the parties and the plaintiff was not liable on the resale. The court further held that the Collector had the power of ordering resale and the resale in this case was a proper one, and if there had been a completed binding contract, the plaintiff would have been liable to pay the short-fall of Rs. 1,22,000/- and the Collector could recover the money by means of distress or sale.
Issues: 1. Whether the conditions of sale announced at the auction, which required the plaintiff to deposit more than one-sixth of the annual fee, were ultra vires and not binding on the plaintiff. 2. Whether the auction sale was complete before the bid was accepted by the Collector and finally approved by the Chief Commissioner. 3. Whether the plaintiff was liable on the resale. 4. Whether the Collector had the power of ordering resale and whether the resale in this case was a proper one.
Ratio Decidendi: 1. The conditions of sale announced at the auction, which required the plaintiff to deposit more than one-sixth of the annual fee, were ultra vires and not binding on the plaintiff because they were inconsistent with the rules made under Section 58 of the Excise Act. 2. The auction sale was not complete before the bid was accepted by the Collector and finally approved by the Chief Commissioner because the conditions of sale made the acceptance of the bids subject to the confirmation of the Chief Commissioner. 3. The plaintiff was not liable on the resale because there was no completed contract between the parties due to the withdrawal of the bid before the Chief Commissioner gave his assent. 4. The Collector had the power of ordering resale under the conditions of sale and the rules made under Section 58 of the Excise Act, and the resale in this case was a proper one.
Final Decision: The appeal was dismissed with costs.
Kapur, J.
1. This is an appeal by the Union of India against an appellate judgment and decree of the Senior Subordinate Judge affirming the decree of the trial Court granting a declaration and issuing an injunction against the Union of India. The plaintiff is a licensed vendor of country liquor in the Province of Delhi and in the Punjab and has been one for Several years.
2. By a document, Exhibit P. I, notice was given for the auction of a country liquor shop situate in Katra Barian for the year beginning from 1-4-1946, to 31-3-1947. The public auction was to be held on 20-3-1946, and it was so held by the Collector. It is admitted that the conditions of auction were read out to the intending bidders at the time of the auction on 20-3-1946 and they are marked as Exhibit D. W. 1/1 and only two of the conditions are relevant to the dispute :
"32. The Collector will not be bound to accept the highest bid. If in the opinion of the said officer the bid for any particular shop is excessive he will have the power to announce at that very time that if anybody exceeds the bid which is already too high, then the whole or a part of the bid shall be payable at once,"
"34. The person whose bid is accepted will have to deposit one-sixth of the fee or such share which the Collector will decide within seven days and if such person does not so deposit the fee, the sale in his favour will be set aside and his Rs. 25/- fee for making a bid will be forfeited and there will be a resale by auction and if there is any short-fall in the fee, the liability will be of the person who had made the bid."
3. A bid was made by the plaintiff Narain Singh. It is admitted that it was announced at the time that half the fee will have to be paid. The final bid of Narain Singh was raised to Rs. 3,72,000/- and under the orders of the Collector he was asked to deposit Rs. 1,86,000/-. Reference at this stage may be made to another condition of the auction that all bids were to be subject to the sanction of the Chief Commissioner of Delhi Province and he had the authority to reject any bid without giving any reasons and to convey this in any manner he liked.
4. On 22-3-1946, by a letter, Exhibit P-2, an offer was made by the plaintiff to deposit Rs. 62,000/- (which is one-sixth of his bid) which is an application to the Deputy Commissioner, Delhi, wherein the plaintiff stated that he had made a foolish bid of Rs. 3,72,000/-, that he had lost sight of the fact that half the amount of the total bid was required to be paid in advance, that the opposite party who pushed up the bid only wanted to ruin him, that he was finding it impossible to arrange for the payment of this huge sum of money, that he was prepared to deposit licence fee of two months in advance and a further Bum of Rs. 31,000/- every month and that he was throwing himself at the mercy of the Deputy Commissioner and in the end he prayed that he may be allowed to deposit two months license fee Rs. 62,000/- instead of half of the "annual fee." On 29-3-1946, treasury challans for a sum of Rs. 62,000/- were prepared at the instance of Narain Singh. They are Exhibits P-3 and P-3(a). Along with this was a cheque for Rs. 62,000/- dated 30-3-1946, on Grindlays Bank Limited in favour of the Reserve Bank of India, Delhi. Evidently the payment of this was stopped and the endorsement "received payment" has been scored out. On 25-3-1946, the Excise Officer directed the plaintiff to deposit Rs. 1,86,000/- on account of advance of the license fee. On 3-4-1946, the Collector gave notice to the plaintiff to pay half the amount of the fee and also that unless that was paid there would be a resale at his risk and account. There is on the file an application, Exhibit P-5, of April 1946, the exact date is not given in which the plaintiff says that on 29-3-1946, he was ordered to deposit Rs. 62,000/- as advance for two months fee and to take charge of the shop, but that morning (i.e. the date on which the application is
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